Median Nightmare

In the run-up to this afternoon’s supposed “end of QE”, “mainstream madness” has reached a fever pitch – as has TPTB’s “manipulation, jawboning, and prayer.” Humanity’s dark side is fully visible in articles like “Yahoo! Finance’s illustration of QE “success”; a panel of sub-humans attacking Peter Schiff for telling the truth to the delight of CNBC’s bubble-headed, Stepford Wife host; and of course, flat out contradictions, as the dumbed down media rapidly loses touch with reality. Meanwhile in Europe, the ECBs Chief Economist claims to see no signs of deflation or recession, despite having taken interest rates to negative territory and initiated a new round of QE.

And taking the cake, Switzerland’s Finance Minister warned that the proposed gold initiative would be disastrous for a nation that, as it turns out, became the world’s premier financial destination on the back of a gold-linked currency. Claiming a gold-backed Franc would damage the “credibility of SNB monetary policy,” she described gold as “among the most volatile, and risky investments” on its book. Fortunately, Swiss bankers won’t make this decision – as the people will do it for them, via a potentially historic referendum on November 30th. “Shockingly,” initial polls favor a “yes” vote; and as you’ll see in this must read piece by Grant Williams, the “yes” movement will indeed be a force to be reckoned with.

All along we have written of how the gold price at the time of the vote will be a key factor in its outcome, which is why the Cartel has so viciously suppressed prices this Fall. That and countless other reasons, like today’s FOMC meeting, next week’s mid-term elections, and the aforementioned commencement of ECB QE. However, irrespective of how successful – or unsuccessful – they are between now and November 30th, we expect “yes” support to not only be strong, but exceedingly so. The Swiss fiercely support their direct democracy process; and after a decade of Central banking madness, they have a unique, historic opportunity to regain the top tier of global financial credibility. Given the horrific disaster the Swiss Franc’s peg to the Euro has been, I wouldn’t be surprised one bit to see the initiative pass. And if it does, you will be kicking yourself for having neglected to buy precious metals at such historically undervalued prices – just as Swiss National Bankers already do, for having sold near the markets lows at $300-$500/ounce.

In the two weeks following the “liquidity vacuum” that caused all-out panic amongst Fed governors, market manipulation has been historic – with each passing day causing the “reality gap” to widen. As you can see, we have witnessed nearly identical trading patterns for stocks and precious metals each day this week, utilizing the same algorithms as usual. This morning is no different, as the Fed prepares to “end QE,” but do so with all manner of dovish caveats. Trust us, if the PPT and Cartel hadn’t been able to “stabilize” markets the past two weeks, the Fed’s message would be far more urgent. Which ultimately it will be, when TPTB inevitably lose control. Today, it’s just commodities and currencies thwarting their “recovery” propaganda; but shortly, stocks, bonds and precious metals will join the “exposure party.”

Speaking of reality, let’s start today’s principal topic with this graph of the true state of the global economy – depicting nominal trade growth barely above zero and inflation-adjusted growth deep in negative territory. Which sadly, gibes perfectly with the painful reality of the “median” American, per this depiction of his real net worth plunging to the 1992 recession lows; this one depicting the same for real median household income;this one of home ownership at 1983 levels – per this one of mortgage purchase applications at 1995 levels; and of course, this one depicting Labor Participation at 1978 levels. Unfortunately, this ugly chart shows that whilst Americans have lost their homes at a record pace, rents have surged to record levels – causing the “American Dream” to not only die, but kick dirt in millions of citizens’ faces. And despite relentless hype of “recovery,” there’s no longer a doubt that the housing market peaked more than a year ago – and this summer for “1%” units above $1 million.

Many of these economic ills are the result of global competition – particularly from the Far East. However, politicians and lobbyists’ combined efforts to offshore jobs accelerated this process exponentially. And don’t forget the deadly demographic wave overtaking much of the West, which will only worsen as the Baby Boomers age. However, undoubtedly the Fed’s unfettered money printing has been the most culpable culprit, yielding the inflation that has dramatically reduced living standards – not just in the U.S, but worldwide. Thus, when I read this damning article, describing how 50% of Americans earn less than $28,031/year, yielding median real household income of $51,939, I was motivated to write this article.

Yes, the average family (of four) earned just $51,939 of pre-tax income in 2014, explaining why half of all Americans receive entitlement payments; which, by the way, commenced their parabolic growth nearly simultaneous with the 1971 gold standard abandonment. Not to mention, why student loans have rocketed well above $1 trillion, as desperate families “recruit” children into this inescapable debt prison to pay bills. Looking at this horrific chart of how 45% of all 25-year olds have student debt balances – averaging $20,000 – it’s not difficult to see why home ownership is plummeting. Or, for that matter, why consumer spending is in freefall with desperate retailers already commencing holiday spending promotions. And heck, I haven’t even mentioned Obamacare – which “conveniently” delayed publication of its 2015 prices until a week after the elections.

To demonstrate just how devastating the effect of flat real income, we have put together this “median nightmare” chart. Using estimates of key spending categories in the “need versus want” universe, excluding all discretionary spending, we estimate an annual “cash flow gap” for the average American family above $18,000, which can only be funded by draining record low savings, drawing record high entitlements or increasing record debt levels. Ominously, even if the median income level was after-tax, the average family would be living hand to mouth.

And thus, for those that still believe the Fed will eventually raise interest rates – much less, remove the unprecedented “stimulus” that leaves the U.S. economy and median American – in historically bad shape, please re-think your assumptions. Mathematically, QE must expand exponentially, just as all other fiat Ponzi schemes have engendered. And as it does, the “median nightmare” will only worsen, yielding dramatically increased entitlements, social unrest and currency devaluation. Which is why precious metals have never been more underpriced and perhaps never again will be.

17 Comments

COL Mike
on October 29, 2014 at 3:21 pm

Andy,

Great article! Yes, I saw the Peter Schiff interview on CNBC the other day and it was clear the CNBC Bankster supporters ganged up on Peter. It was so obvious a 1st grader could spot it. When I watched that interview it was clear this short period in history will be looked at as “one of the best times to buy “Silver-Gold”. Peter’s CNBC interview also makes one wonder, do the CNBC morons actually think we can run up the US National debt to maybe 50-100… Trillion. Nah, they can’t be that stupid so they must be part of the propaganda carbon units with tragets on their ass when this all goes down.

Jay
on October 30, 2014 at 10:57 am

I too saw the interview. My reaction was well, do you blame them? Everyone here has been wrong on gold for many years now. It’s natural for the other side to seriously push gold bugs to admit they were wrong. Peter has been wrong on many of his predictions with confidence (gold price bottomed and Fed will not stop QE etc.). I understand he’s been right about the weak economy regardless but in the end he can only be vindicated by higher gold price. I personally think Jim Rickards is the most credible economist at this point because he points out the obvious matters and at the same time doesn’t underestimate the powers-that-be. He doesn’t shout something’s just around the corner. Don’t know why others dislike him but everything he says at least makes good sense and is coming true.

“How do you blame them?” These are blood-sucking leaches with not a clue about economics – and “trade” with OPP, when they have no idea markets are rigged.

Peter has not been wrong about anything, other than that manipulation can temporarily trump reality. And of course, his inability to acknowledge manipulation.

As for Rickards being the most credible analyst, you’re kidding, right? He is the ultimate insider, and speaks more like a conspiracy theorist/politician than an analyst.

Jay
on October 31, 2014 at 8:01 am

Like I said, Peter has been wrong on his predictions, not on his analysis.

If Jim Rickards is an insider, wouldn’t that mean he’s sharing with people insiders’ info? Sounds much more credible to me. At least his work is not a guess or based on emotion. By the way gold broke last year’s bottom price. I am sure you are OK with it.

And Rickards, in my view, is the last person you want to take seriously – as he has so many contradicting agendas. Clearly, however, less than in the past, as he has become a 100% gold advocate in recent years. But trust me, he has made some of the most nonsensical comments imaginable.

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Jay
on October 31, 2014 at 8:58 pm

OK I haven’t been around in this sector long enough to know his track records so I’d have to take your word for it. But his current stance today is exactly the same as yours.

Yes, as I’ve said, he seems to have “found religion” in recent years – as his days of working for and within governments move further into the past.

Jay
on October 31, 2014 at 9:02 am

Well, if Jim Rickards is an ultimate insider I wonder why he’s letting us know all the truth. Why is he not trying to mislead instead? Bill Murphy called him a “former adversary”. Rickards is saying we can expect QE4 in late 2015. Barring from predicting exactly when the collapse is coming his analysis has better outlining and much more realistic. JMHO

Those guys are too dumb to be part of the game. They are just leeches benefitting, unwittingly, from money printing and market manipulation they don’t know exists.

Angus
on October 30, 2014 at 9:15 am

good day Mr.Hoffman

great article ,I would like to remind you that QE4 ain’t happening you forgot about the bail ins, there is about 6 Trill sitting in 401s all ready to be converted to 10yr government bonds and if you are a good patriotic american then you should have no problem with this
Swiss gold vote Oh that will definately not be rigged like the Scottish Freedom vote lol and even if a yes vote does win it will be a none event just like when the Shanghia exchange went online or the new silver price setting mechanism went online infact they will cough up a bs story on MSM why the yes vote would be harmfull to the gold price thus the very next day gold will drop
Gold will rise after the death of the DOLLAR until then enjoy the show because gold is still going down

Oh, QE will keep happening – it’s just a matter of how much is overt, and what they call it. And yes, the 401ks will be toast when the next crisis hits.

As for Switzerland, don’t underestimate the efficiency of their direct democracy system. I’m not worried about fraud, I just want to see what happens.

silversurfer
on October 30, 2014 at 2:10 pm

PM’s continue to remain in strong downtrends after looking somewhat promising a few weeks back.
Not sure about your underpriced…undervalued. Compared to what?
The fact remains that both are being sold off and unless people want to gamble by betting on a “price” increase from here, there is absolutely no need to buy gold or silver at this point.

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